PayPal's Handling of Counterfeits Raises Questions

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AuctionBytes Blog
News and insight focusing on
ecommerce and the online auction industry
by Ina Steiner, Editor of AuctionBytes.com

July 01, 2008

PayPal's Handling of Counterfeits Raises Questions

By: Ina Steiner

Tue July 1 2008 23:38:00

Consumers have been raising questions about PayPal's handling of counterfeit items sold on eBay. AuctionBytes published their concerns along with PayPal's response in Wednesday's Newsflash newsletter.

PayPal's decision to use one company to both destroy counterfeits and to resell SNAD items involved in claims, and its instructions to buyers to send counterfeit items in their original condition to the liquidator, seemed to raise red flags for some buyers and fueled speculation on discussion boards. However, I could find no one who offered proof of any actual wrong-doing.

I talked to PayPal and the liquidator, and you can read the full story in the article in our July 2nd NewsFlash newsletter. I may do a follow-up article, comments and questions are welcome here.

Comments (59) | Permalink

Readers Comments

PayPal's Handling of Counterfeits Raises Questions

by: Will

Wed Jul 2 00:26:19 2008

Reminds me of local police when they confiscate drugs or fireworks - "Held for evidence, then destroyed". Yeah, right!

PayPal's Handling of Counterfeits Raises Questions

by: mindelec

Wed Jul 2 00:45:23 2008

there's no real way of knowing. paypal could tell the liquidator to destroy the items, but that doesn't mean that they do.

PayPal's Handling of Counterfeits Raises Questions

by: tj

Wed Jul 2 00:57:22 2008

Come on people if all the Fakes in the World were burned the fires would burn longer than the Human species...it will never end as long as people want them..thats how iOffer exist

PayPal's Handling of Counterfeits Raises Questions

by: Julie

Wed Jul 2 01:42:06 2008

Oh what a tangled web we weave. I hope the FBI digs into this one!!...

"Liquidity Services does not act as an authenticator, Oldenburg said, and what happens to the item in Texas then depends on the type of SNAD claim. If there is an accusation that the item was counterfeit, PayPal says it directs Liquidity Services to destroy the item."

Kind of cart-before-the-horse, isn't it?

In this scenario, Paypal has already requested the buyer, who claims the item is a fake, to send it to the Texas liquidator. If liquidator is not an authenticator, why send it at all? Paypal's response would most certainly be "well, unless you send it, we won't credit your account". More strong-armed tactics via EvilBay. Typical.

PayPal's Handling of Counterfeits Raises Questions

by: Ming the Merciless

Wed Jul 2 02:07:25 2008

Buyers who suspect counterfeit items should return either an empty box or a box containing some piece of worthless junk to the liquidators with delivery confirmation.

When the item arrives, PayPal should immediately refund the buyer's money just like they do with other ebay disputed item returns under identical circumstances.

PayPal's Handling of Counterfeits Raises Questions

by: Shelly

Wed Jul 2 03:26:56 2008

I think this is relatively new or they decided to codify it in the agreement, because they have a clause allowing them the authority to have the item sent to them by the buyer and the seller may never get it back.

I'm very confused as to the role these companies play in everything- paypal has gone from a user initiated go between for transaction - to confiscator and resell of items. What the hell am I missing here? It makes no sense and can not be seen as anything other than "fishy". Gee, why paypal do you have items that were said to be counterfeit sent any where other than the authorities? Actually, why is PayPal having items sent anywhere other than to the seller or buyer?

I think one huge factor eBay/PayPal didn't consider when they began this rampage was the fury that has inspired many members to question and to out right hunt down the crooked and clearly questionable activities this corporation participates in.

How much of a cut does paypal get from the liquidation service? That will tell us if they are intentionally shipping questionable authentic items to the liquidator to put back into the market.

What a cycle- sold on eBay 400 bucks, buyer says fake- does chargeback- paypal takes the sellers money to pay the CC back- has the buyer ship the counterfeit to the liquidation service- liquidator sales it PayPal gets their portion- back to eBay........over and over again. I wonder how much they can make off of recycling one bag back into eBay to be sold again. Any thoughts?

PayPal's Handling of Counterfeits Raises Questions

by: tehart

Wed Jul 2 05:14:55 2008

Okay, a few things struck me as odd.

''In cases where they buyer doesn't want to return the merchandise to the seller, or the seller doesn't want the merchandise back, PayPal compensates both parties, he said. In those cases, PayPal asks the buyer to send the merchandise to Liquidity Services.''

When did this start? I have never, in all my time being associated with eBay/PayPal, heard that the seller can recoup the money PayPal takes from him/her by simply requesting that the item be sent to a third party.

''PayPal agents work with sellers, and we advocate on their behalf,'' Oldenburg said. If the seller can prove the item is authentic, they can give that proof to PayPal who will give it to the credit card company. But if the credit card company sides with the buyer, PayPal complies and withdraws the money from the seller's account.''

This is completely FALSE! It is no coincidence that PayPal's Seller Protection policy offers chargeback protection on every transaction EXCEPT those deemed Significanly Not As Described.

''PayPal works with the liquidation firm in a very limited number of cases in Buyer Protection claims where the buyer has filed a Significantly Not as Described claim, and the buyer and seller cannot work it out.''

Well, that seems a little strange. According to this article, http://findarticles.com/p/articles/mi_pwwi/is_200306/ai_mark2200282099
, Liquidity Services is ranked as Paypal's #1 bulk source for inventory.

PayPal's Handling of Counterfeits Raises Questions

by: Shelly

Wed Jul 2 05:22:40 2008

Still- why does paypal have anything at all to do with the merchandise other than messaging through paypal dispute resolution. They should never have anything at all to do with merchandise- period. it is a payment service not salvage

PayPal's Handling of Counterfeits Raises Questions

by: x

Wed Jul 2 06:32:35 2008

Referencing: http://tinyurl.com/6e622u ''Using www.liquidation.com & www.govliquidation.com, two marketplaces operated by Liquidity Services,''

And the FBI is going to do what? Liquidity Services also liquidates for the government, there's no checks and balances here folks.

PayPal's Handling of Counterfeits Raises Questions

by: kimbers

Wed Jul 2 07:31:05 2008

'"PayPal agents work with sellers, and we advocate on their behalf"'

Sure, and eBay values small sellers...

Bwahahahahahahahahahahaha!!!

PayPal's Handling of Counterfeits Raises Questions

by: specks

Wed Jul 2 07:51:07 2008

I'm sure the 20 designer handbags being offered in this lot currently at auction on www.liquidation.com are the real thing...

http://cgi.liquidation.com/auction/view?id=1823905&convertTo=U
SD

If I assume they are real and buy them to resell them, then if a buyer decided it wasn't real and went thru this process and sent it in, it would then either be destroyed or resold?

Nice.

PayPal's Handling of Counterfeits Raises Questions

by: stalking horses

Wed Jul 2 08:50:43 2008

I hope we will all eventually see the "arrangement" that the liquidator and PayPal have. I wonder if this arrangement has ever been mentioned during the court preceedings of the high profile luxury designer lawsuits that have been in the news.

It seems logical that the next high profile lawsuits filed by the luxury manufacturers and retailers will be suits filed against the liquidator, and maybe even PayPal.

PayPal's Handling of Counterfeits Raises Questions

by: Lisa

Wed Jul 2 09:50:06 2008

Ha! This must be new...they wanted me to return the merchandise which was faked to the seller. I did get the last laugh. I did tell the person wh o was the legit seller......of the items when this happened and pointed out the seller. Paypal said to get money back i had to send the fake back to the seller and the item was downloaded from the net and full of viruses.

PayPal's Handling of Counterfeits Raises Questions

by: lisa

Wed Jul 2 09:51:05 2008

Ebay just got in big doo doo over fakes on its site in FRANCE.

PayPal's Handling of Counterfeits Raises Questions

by: Karen

Wed Jul 2 10:09:22 2008

They probably sell it to Hudson's Salvage in Hattiesburg Mississippi. They have tons of stuff that goes to their stores in MS,AL and LA. The whole thing sounds suspicious to me.

PayPal's Handling of Counterfeits Raises Questions

by: Angela

Wed Jul 2 10:18:15 2008

Wow. It's too bad that eBay got wind of this. They'll probably revamp their policies ASAP. The big manufacturers could have easily prove this with RFID chips. And because there are multiple companies involved, the feds could pursue racketeering charges.

PayPal's Handling of Counterfeits Raises Questions

by: dimes

Wed Jul 2 10:21:09 2008

Under what legal authority is paypal ''seizing'' goods it believes to be counterfeit?

Isn't the seizure right restricted to law enforcement?

And why is paypal ''destroying'' merchandise that would have evidentiary value in the prosecution of suspected counterfeiters?

Obviously since it requires the return to be made in the original condition in which it was received (according to a poster on that purse forum), the items are going to be resold.

And as Liquidity Services is not an authenticator, it would have no way of knowing that the merch is fake unless it is flagged as counterfeit by paypal, which is clearly not the case.

For all we know, the same fake items are sold on eBay, returned as fakes, liquidated by paypal, bought by an eBay reseller and sold again and again and again (with eBay and paypal making money on every single transaction).

This smells really, really bad.

PayPal's Handling of Counterfeits Raises Questions

by: Patricia

Wed Jul 2 11:02:22 2008

More smoke and mirrors on a daily basis now from Ebay/Paypal. My hope is that some federal dept choses to open an investigation into this company. If everything is as above board and rosey as they claim then they have nothing to hide and nothing to fear!

www.ACEOart.net

PayPal's Handling of Counterfeits Raises Questions

by: Donna McCusker

Wed Jul 2 11:30:44 2008

Could be used as evidence. LV is sueing ebay for fraudulent sales of there products. Ebay could use the purses as evidence.

PayPal's Handling of Counterfeits Raises Questions

by: Rachel

Wed Jul 2 12:34:32 2008

"In cases where they buyer doesn't want to return the merchandise to the seller, or the seller doesn't want the merchandise back, PayPal compensates both parties, he said. In those cases, PayPal asks the buyer to send the merchandise to Liquidity Services."

I would love to know how Paypal comepensates BOTH parties...that is a bold faced LIE!

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